Touchstone shutting down six funds, merging two into existing funds

Touchstone Investments is shuffling its mutual fund lineup in the wake of a couple of acquisitions.

Downtown-based Touchstone, Cincinnati’s largest mutual fund operator, will close six of its funds Tuesday. It’s liquidating those funds because their performance was lacking and they didn’t have the potential to grow enough for Touchstone to keep them operating, Touchstone President Steve Graziano said.

Touchstone acquired most of those funds in two acquisitions last year, when it bought the mutual fund families of downtown-based Fifth Third Bank and of Boston-based Old Mutual Asset Management.

“We didn’t make the acquisition to acquire those (specific) funds,” Graziano said. “They came along the transom. We’re closing the funds that came in and weren’t performing that well and that didn’t have the size.”

Graziano wants all of Touchstone’s funds to be able to reach at least $500 million in assets within three years, he said. The exception is if the fund has a strategy that is out of favor now but is likely to grow in another part of the market cycle.

Shareholders will get cash back if they’re still invested in those funds when they’re liquidated, but they were notified in February and most shifted money to other Touchstone funds.

Touchstone will also merge two funds with existing funds that have similar strategies. In mid-May it will merge the Touchstone Focused Equity Fund into the Touchstone Focused Fund. The surviving fund – the larger of the two – is a former Old Mutual fund. Both invested in a limited amount of securities and could go into any asset class.

“The objective in buying Old Mutual was to get scale in existing funds,” Graziano said. “This is one step to that.”

Touchstone also plans to merge its Short Duration Fixed Income Fund into its Ultra Short Duration Fixed Income Fund in mid-May, pending shareholder approval. That will eliminate its short-duration fund that invests in bonds of one to three years in duration. The surviving fund invests in bonds with durations of less than a year.

Finally, Touchstone is changing the strategy of its Micro Cap Value Fund and changing its name to Touchstone Small Cap Growth Fund. It’ll invest in slightly bigger growth stocks, rather than the tiny value stocks it has owned.

Touchstone, which has $16.4 billion in mutual fund assets, will drop from 47 funds to 39 when the moves are completed.